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Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries. In contrast to traditional lending, which tenders large sums to lendees who have strong credit histories and steady employment, microloans are generally made for less than $1,000 and are available without collateral to individuals with questionable credit histories who may or may not be employed. The central qualification for approving a microloan recipient is that the individual have a clearly defined plan for a small business, whether that be a bakery, dairy, tailor shop, or retail store. Recipients are bound to use profits from their business to repay the loan, and lenders since the inception of microloan programs have reported surprisingly high returns on their investment: up to 96% of microloans are repaid on time.
Though there are several administrative options for microloan programs, one of the earliest has remained the most common. According to this approach, a branch of an established bank or a bank specially formed to issue microloans will locate in an area of need and begin issuing loans to local entrepreneurs. In the early years of microloan programs, banks frequently set up village committees, composed of financial advisors and bank staff, to host weekly progress meetings. This proved a difficult administrative strategy to maintain, however, when villagers began to default on their loans just to avoid the meetings and what they often perceived as interference in their businesses. Though most banks quickly revised this approach when they realized its negative potential, the trust vacuum created when they could not offer a return to investors led many banks to seek other forms of administration.
It can be inferred from the passage that the author makes which of the following assumptions about traditional lending in the form of foreign aid?
Traditional lenders are more interested in earning profit than in giving assistance.
Leaders of struggling countries are dissatisfied with the approach of traditional lending.
Traditional lending is not flexible enough to loan amounts less than $1,000.
A complicated administration process often limited the money available to individuals and families.
Traditional lending is outdated and will eventually be replaced by microloan programs.
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Re: Microlending as a form of foreign aid first became popular
[#permalink]
24 Jun 2008, 00:27
rpmodi wrote:
In contrast to traditional lending, which tenders large sums to lendees who have strong credit histories and steady employment, microloans are generally made for less than $1,000 and are available without collateral to individuals with questionable credit histories who may or may not be employed.
rpmodi wrote:
It can be inferred from the passage that the author makes which of the following assumptions about traditional lending in the form of foreign aid?
Traditional lenders are more interested in earning profit than in giving assistance.
Leaders of struggling countries are dissatisfied with the approach of traditional lending.
Traditional lending is not flexible enough to loan amounts less than $1,000. A complicated administration process often limited the money available to individuals and families.
Traditional lending is outdated and will eventually be replaced by microloan programs.
Re: Microlending as a form of foreign aid first became popular
[#permalink]
24 Jun 2008, 13:05
Hmm. But why not D?
Quote:
Traditional lenders are more interested in earning profit than in giving assistance.
Leaders of struggling countries are dissatisfied with the approach of traditional lending.
Traditional lending is not flexible enough to loan amounts less than $1,000.
A complicated administration process often limited the money available to individuals and families. (Quote: Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries)
Traditional lending is outdated and will eventually be replaced by microloan programs.
Also I'd like to know whether this is a realistic length for a GMAT CR...
Re: Microlending as a form of foreign aid first became popular
[#permalink]
24 Jun 2008, 13:26
greenoak wrote:
Hmm. But why not D?
Quote:
Traditional lenders are more interested in earning profit than in giving assistance.
Leaders of struggling countries are dissatisfied with the approach of traditional lending.
Traditional lending is not flexible enough to loan amounts less than $1,000.
A complicated administration process often limited the money available to individuals and families. (Quote: Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries)
Traditional lending is outdated and will eventually be replaced by microloan programs.
Also I'd like to know whether this is a realistic length for a GMAT CR...
Re: Microlending as a form of foreign aid first became popular
[#permalink]
25 Jun 2008, 12:03
1
Kudos
Quote:
Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries. In contrast to traditional lending, which tenders large sums to lendees who have strong credit histories and steady employment, microloans are generally made for less than $1,000 and are available without collateral to individuals with questionable credit histories who may or may not be employed. The central qualification for approving a microloan recipient is that the individual have a clearly defined plan for a small business, whether that be a bakery, dairy, tailor shop, or retail store.
Hmm. I eliminated C because it seemed for me as too strong (but then, I was sure that I was doing CR ). Here is my reasoning:
These facts are stated about traditional lending explicitly, strongly assumed or can be inferred: - hard to bypass bureaucracy and administration costs - sometimes money didn’t reach people - typically lends large sum of money - individual need to have strong credit history and steady employment in order to qualify
Overall, it can be inferred prom the passage that traditional lending is less flexible than microlending (in general).
However, from there does not follow that traditional lending is not suitable for sums less than 1000$. In principle, sums less than 1000$ could be lend under the traditional lending scheme. Perhaps, it won’t be as convenient as under microlending scheme, but it is still possible. C suggests that this is not possible at all.
Re: Microlending as a form of foreign aid first became popular
[#permalink]
29 Jun 2008, 17:32
rpmodi wrote:
Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries. In contrast to traditional lending, which tenders large sums to lendees who have strong credit histories and steady employment, microloans are generally made for less than $1,000 and are available without collateral to individuals with questionable credit histories who may or may not be employed. The central qualification for approving a microloan recipient is that the individual have a clearly defined plan for a small business, whether that be a bakery, dairy, tailor shop, or retail store. Recipients are bound to use profits from their business to repay the loan, and lenders since the inception of microloan programs have reported surprisingly high returns on their investment: up to 96% of microloans are repaid on time.
Though there are several administrative options for microloan programs, one of the earliest has remained the most common. According to this approach, a branch of an established bank or a bank specially formed to issue microloans will locate in an area of need and begin issuing loans to local entrepreneurs. In the early years of microloan programs, banks frequently set up village committees, composed of financial advisors and bank staff, to host weekly progress meetings. This proved a difficult administrative strategy to maintain, however, when villagers began to default on their loans just to avoid the meetings and what they often perceived as interference in their businesses. Though most banks quickly revised this approach when they realized its negative potential, the trust vacuum created when they could not offer a return to investors led many banks to seek other forms of administration.
It can be inferred from the passage that the author makes which of the following assumptions about traditional lending in the form of foreign aid?
Traditional lenders are more interested in earning profit than in giving assistance.
Leaders of struggling countries are dissatisfied with the approach of traditional lending.
Traditional lending is not flexible enough to loan amounts less than $1,000.
A complicated administration process often limited the money available to individuals and families.
Traditional lending is outdated and will eventually be replaced by microloan programs.
Late D
Microlending as a form of foreign aid first became popular in the 1970s as a way to bypass bureaucracy and administration costs that frequently, though unintentionally, prevented money from reaching individuals and families in struggling countries. In contrast to traditional lending, ..blah blah
The author assumes Microlending has a way to bypass buraucracy and administration costs but Traditional lending does not.So people will have to go through all the paper work to get loans.
Archived Topic
Hi there,
This topic has been closed and archived due to inactivity or violation of community quality standards. No more replies are possible here.
Still interested in this question? Check out the "Best Topics" block above for a better discussion on this exact question, as well as several more related questions.
Thank you for understanding, and happy exploring!
gmatclubot
Re: Microlending as a form of foreign aid first became popular [#permalink]